Phase I - Ultra Domination

From early 2023 through mid-2025, Hyperliquid consistently printed ATHs across key metrics and steadily gained market share, driven by several structural advantages:

  1. A points-based incentive system that attracted liquidity
  2. First-mover advantage on new perp listings (e.g. $TRUMP, $BERA), making Hyperliquid the most liquid venue on newly launched pairs and the go-to platform for pre-market trading (e.g. $PUMP, $WLFI, $XPL). Traders were forced onto Hyperliquid to avoid missing emerging trends, pushing its competitive lead to a peak
  3. Best-in-class UI/UX among perpetual DEXs
  4. Lower fees than CEXs
  5. Introduction of spot trading, unlocking new use cases
  6. Builder codes, HIP-2, and HyperEVM integration
  7. Zero downtime, even during major market crashes

As a result, Hyperliquid’s market share increased continuously for over a year, peaking at 80% in May 2025.

At that point, the Hyperliquid team stood clearly ahead of the market in both innovation and execution speed, with no truly comparable product across the ecosystem.

Phase II - Loss of Momentum: The Rise of the “AWS of Liquidity” and Accelerating Competition

Since May 2025, Hyperliquid’s market share has declined sharply, falling from roughly 80% to close to 20% in volume by early December.

This loss of momentum relative to competitors can be attributed to several factors:

1. Strategic Shift from B2C to B2B

Rather than doubling down on a pure B2C model by shipping its own mobile app or continuously launching new perpetual products, Hyperliquid chose to pivot toward a B2B strategy, positioning itself as the “AWS of liquidity.”

This approach focuses on building a core infrastructure that external builders can leverage, through tools such as builder codes for frontends and HIP-3 for launching new perpetual markets. However, this shift inherently delegates product deployment to third parties.

In the short term, this strategy is suboptimal for attracting and retaining liquidity. The infrastructure is in its early stages, adoption takes time, and external builders don’t yet have the distribution power or the level of trust that the Hyperliquid core team has built over time.

2. Competitors Capitalize on Hyperliquid’s Transition Phase

Unlike Hyperliquid’s new B2B-oriented model, they remain fully vertically integrated and can therefore move significantly faster when launching new products.

Because they don’t delegate execution, these platforms retain full control over product rollout while leveraging the trust they have already built with their user bases to scale quickly. As a result, they’ve become far more competitive than during Phase I.

This has translated into direct market share gains. Competitors now offer the full set of products available on Hyperliquid, while also shipping features that are not yet live on HL (e.g. Lighter launching spot markets, perpetual stocks, and forex).

3. Incentives and Mercenary Liquidity

Hyperliquid has not run any official incentive programs for over a year, in contrast to its main competitors. Lighter, which has led market share by volume in recent weeks (around 25%), is still operating in a pre-TGE points season.

In DeFi more than anywhere else, liquidity is inherently mercenary. A significant share of the volume that migrated from Hyperliquid to Lighter (and elsewhere) is likely incentive-driven, tied to airdrop farming. As with most perpetual DEXs who run points seasons, Lighter’s market share should decrease post-TGE.

Phase III - The Rise of HIP-3 and Builder Codes Dominance

As outlined above, building the “AWS of liquidity” is not the optimal short-term strategy. However, over the long term, it is precisely this approach that positions Hyperliquid to become the central hub of global finance.

While competitors have managed to replicate most of the features currently live on Hyperliquid, true innovation continues to originate from Hyperliquid.

Builders operating on Hyperliquid benefit from domain-specific specialization, allowing for more targeted product development strategies built on top of a continuously evolving infrastructure.

Conversely, protocols that retain full vertical integration, such as Lighter, will face limitations in simultaneously optimizing development across multiple product lines.

HIP-3 is still in its early stages, but its long-term impact is already becoming measurable. Major players such as @tradexyz have launched perpetual stocks, @hyenatrade has recently deployed its terminal for trading against USDe, and more experimental markets are emerging like @ventuals for pre-IPO exposure and @trovemarkets for niche speculative markets such as Pokémon or CS:GO assets.

HIP-3 markets are likely to represent a meaningful share of Hyperliquid’s total trading volume by 2026.

The key driver that will ultimately restore Hyperliquid’s dominance is the synergy between HIP-3 and builder codes.

Any frontend integrating Hyperliquid can immediately access the full set of HIP-3 markets, allowing them to offer unique products to their users. Builders are therefore incentivized to launch markets via HIP-3, since those markets can be distributed across any compatible frontend (Phantom, MetaMask, etc). and tap into entirely new liquidity flows. It's a perfect virtuous circle.

The continued development of builder codes makes me increasingly optimistic, both in terms of revenue generation and active user growth.

For now, builder codes are primarily used by crypto-native applications (Phantom, MetaMask, BasedApp, etc.). However, I expect a new category of super apps built on Hyperliquid to emerge, applications designed to attract an entirely new user segment that is not crypto-native.

This is likely the vector through which Hyperliquid enters its next phase of scale. It is also the focus of my next article. stats from @artemis & @hydromancerxyz s/o @joke_is_here & @sumfxn for theirs insights.